According to a recent report published by Allied Market Research, titled, “Robo Advisory Market By Business Model, Service Providers, Service Type, and End User: Opportunity Analysis and Industry Forecast, 2020–2027”, the global robo advisory market size was valued at $4.51 billion in 2019, and is projected to reach $41.07 billion by 2027, growing at a CAGR of 31.8% from 2020 to 2027.
The global robo advisory market is experiencing significant growth, and is anticipated to grow considerably in next few years. Robo advisors offer online services with respect to investment management. It employs mathematical algorithms to provide financial advice to clients with minimal human intervention. Robo advisors use online questionnaires that obtain information about the clients’ degree of risk-aversion, financial status, and desired return on investment.
Rapid growth of the robo advisory market, owing to continuous increase in adoption of advance technology and digitization in financial organization and growing government initiatives for boosting robo advisory in developing nations such as China and India drives the growth of the market. However, security & compliance concerns are expected to hinder the robo advisory market growth. On the contrary, technological advancements, such as AI integration in digital investment platforms and untapped potential of emerging economies are expected to present major opportunities for the market growth during the forecast period.
Furthermore, robo advisory services offers the comprehensive suite of solutions and services with the help of algorithm calculations that meet with the investors financial goals digitally and provide accessible investment advice. Multiple banks are currently suffering from low client customer satisfaction in these unprecedented times. Robo advisors provides a potential solution to boost these numbers by serving customers in the way they demand.
By end user, the robo advisory market was led by the high net worth individual segment in 2019, and is projected to maintain its dominance during the forecast period. Growing adoption of robo advisor serving the HNIs to manage their monetary assets and to increase their value in the market by reducing loss drives the growth of the market in this segment. However, the retail investor segment is expected to grow at the highest rate during the forecast period, owing to growing adoption of this services among the retail investors to manage and control their portfolio.
Region wise, the robo advisory market size was dominated by North America in 2019, and is expected to retain its position during the forecast period. The major factor that drives the growth of the market in this region includes rise in adoption of robot advisory among the investor and presence of major players such as Betterment and Vanguard. However, Asia-Pacific is expected to witness significant growth rate during the forecast period, owing to increase in adoption of digital technologies across emerging countries and rapid increase in disposable income of the middle-class population.
The outbreak of COVID-19 has positively impacted the growth of the global robo advisory industry. Robo advisory services are increasing in these uncertain times among consumers, owing to its completely virtualized offerings during lockdown situation across countries. For instance, Wealthfront witnessed increase in number of account openings for robo advisory with 68% during the crisis, while from a returns perspective Wealthsimple’s mutual funds have outperformed traditional Canadian funds.
All these factors accelerated the need for digitalization, which is anticipated to provide remunerative opportunity for robo advisors in these crucial period. To be competitive in the market and stop the reduction in assets value, various traditional players are adopting robo advisory for offering efficient financial planning products.
Key Findings of the Study
- By business model, the hybrid robo advisors accounted for the robo advisory market share in 2019.
- On the basis of service type, the comprehensive generated the highest revenue in 2019.
- Depending on service providers, the fintech robo advisors generated the highest revenue in 2019.
- Region wise, Asia-Pacific is anticipated to exhibit substantial growth during the forecast period.
The key players profiled in the robo advisory market are Betterment, Blooom, Charles Schwab Corporation, FMR LLC, Personal Capital Corporation, SoFi, SIGFIG, The Vanguard Group Inc., Wealthfront Corporation, and WiseBanyan Inc. These key players have adopted various strategies to increase their market penetration and strengthen their position in the industry.